[Editor's Note: The transaction as described in this article was approved by the Ontario Superior Court on October 8.]
A buyer has been found for the multi-phase Elevate condominium project in Kitchener, providing some hope for the project after construction was paused and the project was placed under receivership nearly a year ago.
The site of the Elevate project is 1333 Weber Street East, located a five-minute drive north from the CF Fairview Park shopping centre and between a Beer Store and Zehrs Markets.
The project was being developed by Pamata Hospitality Inc., according to several pre-sale project websites, and was owned by 1776411 Ontario Ltd. and 1333 Weber Street Kitchener LP.
For the site, the developer was planning a four-phase project consisting of four condo buildings between 12 and 15 storeys, with a total of 544 units. According to the court-appointed Receiver in their first report after the receivership order came into effect, the 177-unit first phase was approximately 80% complete, the second and third phases had begun work on the foundation, while the site of the fourth phase was still raw land.
The Receivership
The application seeking to appoint a Receiver over the project was filed by Vancouver-based Genesis Mortgage Investment Corporation, which is managed by Gentai Capital Corp., a non-bank mortgage lender. In its application, however, Genesis identified itself as the "junior secured lender in a syndicate of secured lenders" that also includes CMLS Financial and Computershare Trust Company of Canada.
In July 2021, the syndicate, through CMLS, entered into two separate mortgage loan facility agreements with the developer. The senior lenders — CMLS and Computershare — agreed to provide a loan facility for the principal amount of $52,800,000 while the junior lender — Genesis — agreed to provide a facility for the principal amount of $13,000,000, which was later increased to $19,000,000.
According to the lenders, the developer defaulted on the loan agreements on several occasions. In May 2022, without the knowledge or consent of CMLS, the developer began incurring construction costs on the latter phases of the project. In December 2022, several construction liens were then registered against the property. Finally, in March 2023, the developer failed to make an interest payment to CMLS and also failed to make a municipal tax payment.
The Elevate Condo construction site at some point before the receivership. / Gilliam Group
Later that month, the lenders issued a demand letter and notice of intention to enforce security. However, the parties then reached a forbearance agreement that delayed the enforcement to March 1, 2024 or upon another default. As part of the forbearance agreement, the senior lenders also agreed to increase their loan facility by $2,000,000 and the junior lender by $3,000,000, in what was described as "bailout funding."
The developer also secured additional funding from two other lenders — Westmount Guarantee Services Inc., a pre-sale deposit insurance provider, and CORFinancial Corp., a restructuring firm — that hold mortgages in the principal amounts of $50,000,000 and $3,500,000.
The forbearance agreement would not last long, however, as the developer subsequently defaulted after at least 18 construction liens were registered beginning in July 2023. Construction then immediately ceased. According to Genesis, following the defaults, they terminated their agreement with CMLS and thus filed a receivership application, which was granted by the Ontario Superior Court on October 12, 2023, solely on its own behalf.
The Sale
According to the court-appointed Receiver in a report dated September 27, 2024, charges on the title total to around $153.5 million and now consist of, in priority order:
- A first mortgage for the principal amount of $82 million in favour of Genesis, CMLS, and Computershare.
- A second mortgage for the principal amount of $50 million favour of Westmount.
- A third mortgage for the principal amount of $3.5 million in favour of COR.
- Approximately $17.78 million in favour of 15 parties that filed 22 construction liens.
To recover the outstanding amounts, the court approved the sales process in December 2023 and the property was subsequently listed for sale by CBRE's Land Services Group, led by Mike Czestochowski and Lauren White.
The 1333 Weber Street East site in Kitchener. / CBRE
According to the Receiver, as of the January 30 bid deadline, CBRE had found 37 interest parties, nine of whom toured the site, and seven of whom submitted offers. However, the first mortgagees would not approve any of the offers "as the values were below the amount owing to the First Mortgagees and, in the view of the First Mortgagees, below the value of the Project," said the Receiver.
Genesis then submitted their own bid, a credit bid, for the project in March, with the purchasers including Genesis Mortgage Investment Corporation; Elm Acquisitions Corp, an affiliate of Ontario-based developer Elm Developments; and Dorr Capital Corporation, a Toronto-based commercial real estate lender.
The purchase price is the full amount owing under the first mortgage ($67 million), plus interest, expenses, and closing adjustments.
The transaction is expected to close on or before October 30, if it is approved by the Ontario Superior Court on October 8 — a strong likelihood since the purchasing party includes one of the first mortgagees.
[Editor's Note: On October 8, the Ontario Superior Court approved the transaction. In a press release on October 9, Elm Developments and Dorr Capital said the purchase price was approximately $75 million.]
The Presale Purchasers
According to the Receiver, all 177 units of Tower A, plus 325 units between Tower B and Tower C, had been pre-sold prior to the receivership. Only a portion of the pre-sale purchase agreements will be assumed by the new developers, however.
For buyers of Tower A, which remains at around 80% completion, all existing purchase agreements will only be assumed by the new developers if the pre-sale purchaser agrees to a 24% price increase, "as the market pricing for these units has changed" since they were originally signed. If buyers decline to pay the price increase, their agreements will be terminated and their deposits will be returned.
For buyers of Tower B, all purchase agreements will be terminated and buyer deposits returned, while all purchase agreements pertaining to Tower C will be assumed by the new developers upon closing, as is.
According to the Receiver, upon approval of the transaction on October 8, a process will be established that will allow buyers whose purchase agreements are terminated to submit a claim for the return of their deposits.what
If the transaction as proposed is approved, a payout of up to $2,835,722 will also be made to the various parties who hold registered construction liens.
